Last update on 2024-06-27

Exxon Mobil (XOM) - Dividend Analysis (Final Score: 7/8)

Exxon Mobil (XOM) Dividend Analysis: Performance and stability using an 8-criteria scoring system. Final Score: 7/8.

Short Analysis - Dividend Score: 7

We're running Exxon Mobil (XOM) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Exxon Mobil (XOM) receives a dividend score of 7 based on an 8-criteria scoring system that evaluates the performance and stability of its dividend policy. Here's a brief overview: 1. **Dividend Yield**: Currently at 3.68%, which is lower than the industry average of 5.02%. Despite lower yield, it's stable over 20 years. 2. **Dividend Growth Rate**: Over the past 20 years shows fluctuation with some years exceeding 5% growth, but not consistently. This indicates volatility. 3. **Payout Ratio**: Average payout ratio over 20 years is 40.5%, which is below the 65% threshold. Shows financial discipline with few outlier years. 4. **Earnings Coverage**: Generally healthy with most years below 0.5 dividend coverage ratio. Exception in poor market condition years like 2016 and 2020. 5. **Cash Flow Coverage**: Ideally coverage ratio above 1; however, had significant dips in 2009, 2016, and 2020 but recovered in 2021. 6. **Conduct of Dividend Payments**: Stable dividends since payout began, steady increase over past 20 years with no significant drops. 7. **Committed Dividend Payments**: Consistent dividend payments for over 25 years with a general upward trend. 8. **Stock Repurchase**: Reliable stock buybacks over 20 years, boosting EPS and shareholder value, with few sporadic no-buyback years. Overall, Exxon Mobil demonstrates good dividend stability with areas of improvement.

Insights for Value Investors Seeking Stable Income

Considering its dividend history, payout ratio, and stable dividend payments over the years, Exxon Mobil (XOM) is a solid investment for those seeking reliable income. However, the fluctuating growth rate and coverage ratios suggest investors should monitor market conditions as these can impact the dividends during tough years. The overall score of 7 indicates a strong but not flawless investment option. Further analysis and comparison with industry peers are advisable for a comprehensive view.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company's annual dividend compared to its share price. It is a key measure for income-seeking investors.

ExxonMobil’s current dividend yield is 3.6807%, which is lower than the industry average of 5.02%. Looking at the trend over the last 20 years, the company's dividend yield has generally been stable, with significant peaks in 2009 and 2020 when it reached 6.49% and 8.4425%, respectively. The sharp rise in 2020 was likely influenced by a drop in share price due to global economic disruptions. The trend suggests that ExxonMobil’s dividend yield, although slightly below the industry average now, has shown resilience and consistency over the years. This relatively consistent yield can be seen as a positive indicator for long-term investors, yet being lower than the industry average now could indicate potential room for improvement or be a result of a rising stock price.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments over a specified period. A higher growth rate indicates a company's commitment to returning capital to shareholders and is usually a positive sign for future dividend prospects.

Examining Exxon's Dividend per Share Ratio over the last 20 years, it fluctuates significantly from a low of 0.2874 to a high of 17.8378, with an average value of 6.9074. While there are years with high growths such as 2022 and 2012, there are also periods of downturn, notably 2021. This fluctuation indicates inconsistency in dividends, making it difficult to assess a stable growth rate of over 5% per annum continuously. Although some individual years demonstrate substantial growth, the volatility implies these rates aren't sustained systematically year over year, questioning the reliability of consistently achieving a 5% growth rate. Hence, the trend is mixed as it does not reflect a constant upward trajectory, essential for exceeding the 5% average growth over time.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio indicates the proportion of earnings a company pays to its shareholders in the form of dividends, which directly influences the company's ability to maintain and potentially grow these payouts.

For Exxon Mobil (XOM), the average payout ratio over the last 20 years stands at approximately 40.5%, which is notably below the 65% threshold. A payout ratio lower than 65% is generally considered healthy as it suggests that the company retains enough earnings to reinvest in its operations while also rewarding shareholders. Examining the detailed yearly payout ratio: Exxon Mobil has consistently maintained a payout ratio well below 65% in most years, with some exceptions such as in 2015 (74.81%), and the spike in 2016 (158.51%) which can be attributed to external factors like declining oil prices impacting earnings that year. Despite these outliers, the long-term trend indicates financial discipline in managing dividend payouts. The business fundamentals appear strong, underscoring a positive trend for dividend sustainability and potential growth, solidifying Exxon Mobil as a dependable income-generating investment.

Dividends Well Covered by Earnings?

Dividend coverage ratio measures the ability of a company to pay dividends out of net income. It highlights dividend safety.

Exxon Mobil (XOM) demonstrates a generally good ability to cover its dividends with its earnings per share (EPS). Over the years, the dividend coverage ratio has generally been below 0.5, which indicates that less than 50% of the EPS was used to cover dividends. This is a healthy trend, suggesting dividends are well covered by earnings. However, in difficult years like 2016 and 2020, the coverage was notably worse, especially in 2020 with a negative EPS coverage of -0.662. This reflects the company's struggle during extreme market conditions. Despite these challenging periods, 2022 showed a strong recovery with a coverage ratio of 0.2678, indicating a return to better times. Overall, with an average coverage ratio comfortably allowing for dividends to be paid without overextending earnings, XOM shows stability and a commitment to shareholder returns.

Dividends Well Covered by Cash Flow?

examine how well Exxon Mobil's dividends are supported by its free cash flow.

Examining Exxon's historical data, the ideal trend is for the coverage ratio to be well above 1, indicating ample cash flow to cover dividend payments. Coverage below 1 suggests potential vulnerability or depletion of cash reserves. In 2009 and 2016, the ratio spikes due to the downturn in free cash flow overshadowing the consistent dividend. The concerning dip is in 2020 at -5.687, indicating free cash flow was insufficient, stressing the importance of sustainable dividend models. A recovery is witnessed in 2021 as the ratio shifts back to a more balanced 0.414.

Stable Dividends Since the Company Began Paying Dividends?

Dividend consistency over elongated periods is crucial for ensuring predictable income streams, reducing investment risk and reflecting corporate stability.

Analyzing Exxon Mobil's dividend data, it is evident that the dividend per share has shown a steady increase from $0.98 in 2003 to $3.68 in 2023. There are no drops by 20% or more in any year during this period, evidencing strong dividend stability. Such performance illustrates Exxon’s robust financial health, determination to return value to shareholders, and attractiveness for income-seeking investors.

Dividends Paid for Over 25 Years?

Considering dividends paid for over 25 years is crucial as it demonstrates the company's commitment to returning value to shareholders and manifests its financial stability and predictability.

Exxon Mobil (XOM) has consistently paid dividends for the last 25 years, as observable from the continuous yearly dividend per share payments from 1998 to 2023. The dividend per share has shown a general upward trajectory over the years, from $0.82 in 1998 to $3.68 in 2023. This trend of increasing dividends highlights Exxon Mobil's commitment to returning value to its shareholders and its capability to generate steady cash flows and net income over the long-term. This consistency is a positive indicator for investors seeking stable and reliable dividend income. Such a sustained dividend history is often a sign of a mature and well-managed company that prioritizes shareholder returns. The enduring pattern of dividend payments firmly positions Exxon Mobil as a favorable option for dividend-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company’s commitment to returning value to shareholders and reducing share dilution. Regular buybacks can signal strong financial health.

Over the past 20 years, Exxon Mobil (XOM) has shown a consistent pattern of stock repurchases, reducing its shares outstanding from approximately 6.65 billion in 2003 to 4.05 billion in 2023. This trend reflects a notable average annual reduction rate of -2.4175%. The decrease in shares outstanding is generally perceived positively, as it can lead to higher earnings per share (EPS) and a more substantial ownership stake for remaining shareholders. The reliable repurchase years such as 2004 to 2009 and 2011 to 2016 as well as 2018, 2022, and 2023 point to sustained efforts in managing the capital structure efficiently. However, the sporadic years with no repurchases or slight increases in share count, such as in 2010 and 2017, are exceptions in an otherwise strong record. Overall, this consistent buyback practice suggests sound financial health and a shareholder-friendly management approach, thus positioning Exxon Mobil positively in this criterion.